Dollar bills (11/4/22)

Good morning and happy Friday, team. It was a busy week but we made it. Shout out to the 442 of you who joined us this week.

And it brings us no pleasure to report this…on a Friday, no less…but daylight saving time ends this Sunday. Sunset on Sunday in NYC is at 4:46pm.

In today's newsletter:🔁 Changes on Capitol Hill💸 Space + A&D investing📚 Payload’s picks

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Space Is Set to Lose Some Key Advocates in Congress

Can you smell it in the air?

Midterm elections are almost upon us in the US. For our legion of overseas readers, this is the time of the year when American airwaves are completely saturated with political ads. Come Tuesday, one or both chambers of Congress could change hands.

We aren’t prognosticators—nor are we political horse race jockeys—so we won’t try to predict any Tuesday night outcomes, nor will we dwell on the underlying politics. But some congressional changes are already known because of retirements or primary losses, so we’ve put together a feature on what could change with military space policy.

Setting the scene…

The looming departure of national security space champions from Capitol Hill is expected to leave a vacuum as the Space Force approaches its third bday. But by all appearances, more junior members are waiting in the wings for their shot to drive military space policy.

Rep. Jim Cooper (D-TN), a longtime champion of national security priorities in orbit and founding father of the Space Force, isn’t seeking reelection. That leaves a question mark as to who will take his place as top Dem on the House Armed Services Committee strategic forces panel.

“Congress has got to get its act together. Even in my subcommittee, space for years has been an afterthought. Now it’s a central player,” he said. “That in a sense is one of the major accomplishments…We took space from a fringe subject…and made military space a mainstream defense topic.”

Other space-heavy departures include Sen. Richard Shelby (R-AL), Rep. Mo Brooks (R-AL), Rep. James Langevin (D-RI), and Rep. Liz Cheney (R-WY).

What it means for USSF

With the looming absence of some of its most outspoken congressional advocates, the Space Force will need to boost its outreach on Capitol Hill.

Still, “the threat that the Space Force was developed to address has not gone away. If anything it’s become more apparent to leadership,” said Mike French, VP for space systems at AIA and former NASA chief of staff. “Our sense is we’re going to continue to see strong bipartisan support.”

What else?

Our story surveys the laundry list of space policy priorities in 2023, both on the civilian and military side. We also take a closer look at who may take up the space leadership mantle and hear from a couple experts on the matter.

+ Bonus content: In our exit interview, Rep. Cooper shared a detail about his internet provider in rural Tennessee. “I’ve got Starlink out on the farm. It’s awesome,” he said. “The service is superb.”

Curiosity piqued? Great, read the full story here. 

Dollar dollar bills

Despite deteriorating economic conditions on Earth—and plenty of reasons to be bearish on the sector—space tech is set to have a banner year in VC funding.

Global venture investment into space startups totals ~$6.2B billion this year, according to a recent PitchBook tally (the data runs through Oct. 24). That’s roughly the same amount as 2021, itself a record year, and we still have two months to go.

2021 saw 192 space deals vs. this year’s 112. Deal count is tracking to be lower this year, while deal size is set to be higher on average.

Some observations

The distribution of capital is lopsided. SpaceX, the US’ most valuable startup, continues to dominate everyone else by a lead equivalent to Pluto’s distance from Earth. The launch juggernaut has raised $3.6B+ YTD. Other companies with mega-rounds that PitchBook highlighted include Iceye ($136M Series D), Hadrian ($90M), and Firefly ($75M).

The focus. While VCs spread the love across multiple space sub-sectors, they saved most of that love for EO, satellite communications, and launch.

Led by Founders Fund, Lux Capital, and a16z, military- and security-related investments are once again in vogue. American A&D startups bagged $7B in venture financing through Oct. 13, per PitchBook. One theory for why deal-making in the dual-use space is more resilient than other sectors:

1. Government spending is counter-cyclical.

2. Russia’s invasion of Ukraine and long-simmering tensions with China have driven Western governments to boost defense budgets.

3. “Companies focused on defense and security are considered recession-proof,” PitchBook asserts.

It wasn’t too long ago that venture capitalists saw defense tech as persona non grata. "Since the early 2000s, you had a movement of people that felt that [working on these technologies] was taboo," Lux Capital’s Josh Wolfe told PitchBook.

Payload’s prediction: Dollars will keep flowing into the A&D space, as geopolitical tensions accelerate defense budgets and the quest for space supremacy. That said, newly public space companies are having a rough go of it, liquidity is drying up, and the cost of capital is climbing. Consolidation and business closures will continue until morale improves.

At the end of the day, the data suggests that despite the shakeouts, space is still open for business.

Share this story with a recession optimist:

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In Other News

• The Long March 5B China used to launch the Mengtian space station module reentered the atmosphere over the Pacific Ocean this morning, per USSPACECOM.

• SES (PA:SESG) has “clear line of sight” to the next round of spectrum-clearing proceeds, representing $3B. The satellite operator booked €1.4B ($1.38B) of revenue in Q1–Q3 (+6.1% YoY).

• EchoStar ($SATS) reported $497.4M in Q3 revenue (-1.4% YoY) and $19.6M in net income (-35.3% YoY) for the quarter.

• Virgin Galactic’s ($SPCE) Q3 net loss was $146M (+204% YoY) and the company ended the quarter with $1.1B in cash, equivalents, and marketable securities. Virgin says it’s on track to launch commercial service in Q2 ‘23.

• Redwire ($RDW) will launch an upgraded 3D bioprinter to the ISS this weekend on Northrop Grumman’s 18th cargo resupply mission.

• Planet ($PL) satellite imagery shows a key Chinese air base receiving a makeover to accommodate more activity (h/t Defense News).

• Rivada Space Networks issued an RFP for its planned 600 (!) satellite constellation.

• Rocket Lab ($RKLB) shipped the final solar panels to Maxar ($MAXR) for Gateway. The solar panels will eventually live on the lunar space station’s power and propulsion element.